The Economist are clearly struggling to situate successful infant industry in their free market fundamentalist worldview. Straw-man arguments, misrepresentation of opposing views and a every sentence qualified with 'may,' could,' or 'some say.' For example:

'State giants soak up capital and talent that might [or might not?] have been used better by private companies. Studies show that state companies use capital less efficiently than private ones, and grow more slowly [which studies show that? All studies? Most? Or just the ones from business schools and right-leaning economics departments?]. In many countries the coddled state giants are pouring money into fancy towers at a time when entrepreneurs are struggling to raise capital [as if the private sector don't do that!].

'And everywhere state capitalism favours well-connected insiders over innovative outsiders. In China highly educated princelings have taken the spoils.' Not like in Britain and America then?

'Ensuring that trade is fair is harder when some companies enjoy the support, overt or covert, of a national government. Western politicians are beginning to lose patience with state-capitalist powers that rig the system in favour of their own companies.' Are you serious, Economist? Are you actually serious? What about UKTI, or the WTO, or US non-tariff barriers?

The Economist was described by the FT as in 'house magazine of the global Anglophone elite,' and this article reads like a very blunt attempt to champion their interests. This brings me to final snippet: 'its dangers outweigh its advantages. Both for their own sake, and in the interests of world trade, the practitioners of state capitalism need to start unwinding their huge holdings in favoured companies and handing them over to private investors.' If I ever have the misfortune of writing another essay on Marxist political economy I'm going to cite this as a solid example of 'capital' having its own interests.

It seems far fetched to see a revival of state capitalism in the emerging nations by trying to cherry pick some cases from countries which could hardly be the best examples of either free markets or democracy, instead it would be more appropriate to describe the pattern as plutarchy, a combination of plutocracy and oligarchy, though not necessarily applicable to all the emerging economies, such as India, where the Tata group, Infosys, Wipro and several other companies do seem acquiring a global profile on their own.

In the case of Brazil, this article is perfect. Petrobrás is controlled by the the State, since is has majority of voting stock. Petrobras, however, is managed by politicians of Labor Party ( PT) and PMDB, and that is the main reason for its ineficiency.That´s one of the reasons the Petrobrás is loosing value at the stock market. It´s one of the " dog " shares.
Vale, however, is slightly different. The Government has control of voting stock through state owned companies pension funds, and BNDESPAR ( brazilian development bank). President Dilma decided to fire previous CEO- Roger Agnelli - and appointed an ex Vale employee as CEO, but changed some board members, and appointed the deputy finance minister almost as Chairman, having as a front the CEO of Previ- Banco do Brasil pension fund.
In 4 years time, ther will be changes of the Shareholders Agreement of Valepar. AT that time Bradesco and Mitsui, certainly will have their influence sharply reduced. Most likely, by that time, Vale will be a very similar company to Petrobrás !

If you have oil in your country, it should belong to the folk, as in Norway democracy, and not belong to a multi-billionaire, as in non democratic plutocracies!
If you have sweet water in your country, it should belong to the folk, and not a multi-billionaire.
If all banks are bankrupt, and all governments give them 13 trillions $ as in 2008, then the bailed out banks belongs to the governments, and the banksters should be jailed, but not rewarded! (3 trillion $ bonus sum since 2007)

Well, I believe Gandhi said it best: the world has more than enough for the world's need but not enough for its greed.

The fundamental flaw with all these economies. eastern and western is that it employs within its calculus a significant element of debt. As a moral ill and as a flawed concept, we have seen its results. However, one must realize every unit of currency these huge conglomerates boast off, is partially funded by debt that the customer uses to acquire goods and services he doesn't really need. And that includes fuel from the likes of Petronas, Total and Petrobras. Its time to hit the Reset. Back to basics folks.

It's a pity the UK government can't learn from the Chinese and use its 70% controlling stake in RBS to control its bosses’ exorbitant bonuses. As @Modern Asia correctly pointed out, in a lawless environment "State owned firms are forced by the central government to act (mostly) responsibly"

But as The Economist also points out in this article, "State capitalism works well only when directed by a competent state." Have we just identified the principal problem with UK PLC?

The Economist is over sensitive to the idea of state capitalism of today.

State owned enterprises are owned by all citizens of the nation, with each citizen being a shareholder, voiceless and powerless regarding to the affairs of that enterprise when acting as an individual, not unlike that of small shareholders of a big private company.

In international trading, private capitalism is good if its nation’s gunboat is big, state capitalism is good if its nation’s governance is strong.

For nations with both strong governance and big gunboat, then it doesn’t matter which brand of capitalism or any mix of them are employed or deployed.

"State owned enterprises are owned by all citizens of the nation"...
If it's not even nominally democratic (i.e. China) in what sense is this true? China's support of its state-owned enterprises has often screwed over the average citizen.

Dear Economist. I’m afraid you’ve botched a great topic as you’ve missed perhaps the most important development in state controlled capitalism; state supported innovation. Outside the realm of the advances of the military industrial complex in the United States and, more generally, grant and lending programs for small-businesses, the creation investment funds that combine the private sectors’ interest in a strong IRR with the strategic interest of States is breaking new ground.

The focus on state-controlled companies, though important, is less an argument as to whether or not it should continue (few governments would agree that it should), then how long they should remain at the helm. The world is growing at unprecedented rates. Companies that took decades to reach their size in developed markets are sprouting up in a matter of years. Who’s to say such growth shouldn’t be controlled until it can be successfully transitioned?

A weak post from the Economist. Nowhere is there a real argument against state capitalism.

The underlying question here is what constitutes the ideal constitution. Democracy or Communism? With respect to the needs of common people there is no doubt that democracy is far superior.

With respect to economics the western model has been in decline, due to the fact that strongly autocratic countries have been successful in the short time scale of a few years where the west has not.

In essence though the discussion boils down to the question whether the world around us is predictable or not. Communism is assured it is. Democracy, however failable, adapts itself constantly to an everchanging environment. The state of affairs of the past few years has taught us that except for the weather there is nothing more unpredictable than the state of the economy.

There ARE no communist countries in the standard sense of the word. All countries either have at least partially capitalist economic systems or completely reject the usual communist guarantee of equality i.e. North Korea.

Now, even if there were a communist country run by people who were relatively non-despotic, it would- as you said- probably not be terribly successful. But let's not pretend that communist countries actually exist.

State capitalism is that government owns a big piece of major corporation and the government forces the corporation to behave responsibly. Liberal capitalism is that big corporations own the government and the government policy is dictated by big corporations. Here you go.

Absolutely nothing new about Chinese-led market models. In 1955, Mao Tse Tung wrote that the goal of the Communist Party was not to eliminate capital, but to regulate it for the public good. In short, to harness it's productive powers for the long-term good of the people and the state. And by long term, he meant a fifty year plus period.

Yes, state capitalism may prove uncomfortable for many western investors, simply because the Chinese-led models are proving more effective. Perhaps the problem does not lie with State Capitalism, but instead with failed free-market ideology that is the bedrock of Western markets and the neo-Conservative consensus that dominates our corporate boards.

RAE in UK, Areva in France, "intercommunales" of all sorts in Belgium: same state capitalism, very often taken over by a strong personality among the politicians or bureaucrats close to power, and very soon delving in corruption or cronying in the best Russian tradition.

Human nature at its best; corruption at its worst.

In belgium electricity and gas, water, telephone, cable tv, waste treatment and handling are in the hands of politicians with the resulting abuses of power in the handling of contracts to entrepreneurs to company revisors of even in the hiring of employees.

Do not point at the emerging world, look out here around and speak out.

State Capitalism is nothing new. All the countries which arrived to the Industrial Revolution after the U.K. used State Capitalism with a clear industrial policy to survive and prosper.

For example, the largest Spanish companies were created by the Government: Telefonica, Repsol, Endesa, Ence, Iberia, SEAT, CASA....The result has been very successful and they are now among the largest an dmore profitable companies in the World.

So, the action of the Spanish Government created a lot of value for the Spanish society.

The U.K. is not different, and from B.P., to B.T., TO B.A. (all those with the name "British") created World companies.

In Germany, Japan and S.Korea the action of the Government through different industrial and commercial policies gave birth to national corporations and banks like Deutsche Telekom, Deutsche Bank etc.

The US anti-piracy drive has succumbed to the power of neoliberalism. Neoliberalism boosts exploitation, unemployment and limits economic growth. State capitalism boosts production and fosters slow but steady economic growth.

Capitalism, by definition, is a system whereby capital is allocated in a competitive market according to the value of the marginal product of capital. "State Capitalism" as defined in this article is regulated system where capital is allocated by fiat. Accordingly this "State Capitalism" has as much to do with capitalism as "National Socialism (Naziism)" has to do with socialism.

Propaganda used to mean propagating a truth until the Nazis reinvented the meaning of the words. I am disappointed that the Economist would engage in such a confusing discourse.

So if the Chinese government funds manufacturing companies so they can win contracts with US companies (like Apple), we have government fiat striving to win a competitive bid. In such cases, the government is working like an infinite investor.

State capitalism should be at least recognized as a potentially viable alternative to neoliberal capitalism. With so much hope and economic theories supporting the model of neoliberal capitalism, this system has not generated expected benefits.

State capitalism does not exclusively follow the urge to generate profit but rather takes care of social balance of the classes. It redistributes financial wealth to investments of common interest - healthcare, education, public infrastructure...

State capitalism does not exhaust all possible resources (human, technical, natural...) because it is not driven only with desire to maximize profit. Some claim state capitalism can not be as effective as small startups and I do agree. Nor it can generate so much progress and inovative ideas and projects. But it can establish coherent model of social interaction between classes and provide more sustainable growth of other values (trust, cooperation, social security, free education, healthcare...)

I grew up in the system where state regulated the economy in country that no longer exist - Yugoslavia. Although economically inferior to capitalist societies, we have enjoyed other benefits I addressed in my reply.

We earn today far more than in the ages of Yugoslavia, but are not proportionally happier not healthier nor do we have superior education, costs have grown far more than our salaries and the final result is that neoliberal capitalism has not proved recognized advantages compared to the state regulated economy.